INTERMEDIATE-TERM: THE NEXT WEEK COULD BE A TURNING WEEK UNLESS DOLLAR DROPS SHARPLY

From all the cycles due on Friday and the next week, it looks high likely the market will turn lower starting from the next week. However, bulls own a weapon of mass destruction – the dollar. I’m not sure if the dollar will drop sharply the next week. And if that’s true then the market will keep rising while all the cycle due date will look like a bottom date.

Also from US$ Index chart, the text book target for the Double Top is 65.76, which is still at galaxy far far away.

So to summarize, there’s a chance that dollar will drop sharply and therefore the SPX will go much much higher. To be fair, I also posted a bullish dollar chart below for your reference.

Personally, I have no idea about where dollar will go, it may depend on what happens in Beijing when Obama visits China.

From trading point of view, if you followed my setup, because of the “safety first” rule, we should now set the stop loss to breakeven. However, because another reversal bar was formed on the SPY chart on Friday (see red arrow), therefore if Open > Close the next Monday, we’ll have another short signal. So accordingly, if the next Monday, the market rises, you could either wait until close to decide if the stop loss is needed or could let the breakeven stop work first then wait until the close to buy back if it turns out to be the open > close at the end.

OK, now let’s take a look at all the bears conventional weapons. As we all know that the conventional weapons are no compare of the weapons of mass destruction, no matter how advanced they are, so again, the dollar is the key.

Look at the retailers’ sentiment – AAII Bull Ratio. Remember the last weekend report? Retailers were mostly bearish and therefore we got a huge up Monday. And now, retailers are becoming bullish. Could be more bullish though.

Now, let’s take a look at the retailers’ trading actions – Rydex Bull/Bear RSI spread (The ratio between buying Rydex bullish fund and bearish fund), the readings are too bullish.

And now compare institutions and retailers COT report. Apparently institutions are bearish while retailers are bullish.

OK, the cycle:

0.0.3 SPX Intermediate-term Trading Signals, the next 10 day cycle could be a down cycle. Besides there’re too many too large negative divergences on the chart so even without the possible 10 day down cycle, the chart looks very bearish.